High-paying doctors who receive a salary increase of 30 pct. claim, can be hit due to punitive pension rules with tax bills as high as £ 87,000.
Healthcare workers have threatened to join the train and Royal Mail in mass strike if their calls for a 30% wage increase are not met.
But a sudden increase in salary will hit thousands with “astronomical” tax bills, pension experts have warned.
A consultant with an income of £ 120,000 will be forced to pay £ 87,000 if their salary is increased by 30%, according to calculations by Quilter, the wealth manager. A GP earning an average of £ 100,000 will receive an immediate £ 34,500 pension tax levy.
This is due to the type of pension to which NHS workers save, known as “defined benefit”. Any salary growth can cause savers to save more than how much they can put into a pension each year, known as the annual allowance.
Most workers can save up to £ 40,000 a year in a tax-free pension, but breaching this limit – inevitable for doctors as part of their earnings are placed in a final salary scheme – causes a tax bill.